Russia: RUSAL redirects aluminium to Japan as premiums surge amid Middle East disruption

• RUSAL shifts aluminium from China to Japan amid rising premiums
• Weak China demand, strong premiums reshaping global trade flows

Russia’s aluminium major RUSAL is preparing to divert a portion of its shipments away from China toward Japan and other Asian destinations, as ongoing geopolitical tensions linked to the Iran conflict disrupt traditional supply routes. The shift highlights a broader realignment in global aluminium trade, with producers increasingly targeting markets that offer stronger netbacks amid tightening supply conditions.

Premium surge signals tightening physical market

Escalating supply risks in the Middle East, particularly around key transit routes, have led to a sharp rise in regional premiums. Japan’s Q2 benchmark premiums have climbed to around $350-353/t, marking an 11-year high and reinforcing its role as a key price setter in Asia. Similar trends are visible across other regions, with European premiums nearing $600/t and US premiums exceeding $2,500/t, underscoring the growing disconnect between exchange prices and physical market tightness.

China demand softens, arbitrage weakens

China’s import appetite has moderated amid relatively weaker domestic demand and ample local supply availability. Elevated inventories and competitive domestic pricing have reduced the viability of imports, weakening arbitrage opportunities for overseas suppliers. This has prompted producers like RUSAL to reassess destination strategies and shift volumes toward higher-margin markets.

Middle East disruption amplifies global imbalance

The Middle East, accounting for nearly 9% of global aluminium output, remains a critical supply hub. Ongoing disruptions in the region are amplifying global imbalances, particularly for import-dependent markets such as Japan. With limited domestic production, Japanese buyers are increasingly willing to absorb higher premiums to secure material, further intensifying competition for available units.

Premium-led markets redefine pricing power

The current market environment reflects a structural shift where regional premiums are exerting greater influence over trade flows than benchmark exchange prices. Material is increasingly being redirected toward destinations offering superior premiums, while surplus availability in China is likely to be redistributed across other Asian markets.

Outlook

The evolving geopolitical landscape is accelerating a transition toward a premium-driven aluminium market, where trade flows are dictated less by volume demand and more by regional pricing strength. In the near term, premiums are expected to remain elevated and continue guiding supplier strategies, reinforcing Asia’s growing importance in global price discovery.